Petrochemical prices likely to move north in Saudi Arabia

Price of natural gas feedstock is on the rise in Saudi Arabia. This move is likely to have its greatest impact on Sipchem, SAFCO and SABIC, with Tasnee and Sahara facing the least impact. KSA petrochemical firms procure natural gas at one of the lowest prices globally. However they are facing difficulty in gaining new allocations of ethane at the current subsidised price of USD0.75/mmbtu for their capacity expansion plans, due to increasing domestic consumption of gas. This low price was set at 1998, when crude was at US$13 a barrel, compared with over US$100 today. Thus the profitability of Saudi Arabia's petrochemicals companies could be reduced in 2012 if the government increases its gas prices, NCB Capital says. As per the, the secure availability of feedstock at a low cost has offered a competitive edge to the Saudi producers when compared to their global peers. All this could change, impacting the global supply dynamics of the petrochemical industry.
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